In a decentralized organizational structure, how is the organization divided?

In a decentralized organizational structure, the organization is divided by business units that operate independently and have their own functional operations. This means that each business unit has the authority to make decisions and manage its resources without requiring approval from a central authority. Each unit can tailor its operations, strategies, and policies to better meet the unique needs of its market or operational environment.

This structure allows for greater flexibility and responsiveness, as individual business units can quickly adapt to changes in their market or industry without being constrained by a central authority. It also fosters entrepreneurship within the organization, as managers in each unit are empowered to innovate and make decisions that suit their specific circumstances.

While project teams, geographical locations, and customer segments can also be valid ways to organize, they do not inherently reflect the principle of decentralization as clearly as the division into independent business units does. In contrast to a more centralized structure, where decision-making is concentrated at the top levels of the organization, a decentralized approach promotes autonomy and localized management across different business units.